Long-term commercial loans (those repaid over more than one to three years) are typically more difficult to obtain for smaller businesses because the longer the term of the loan, the greater the risk to the lender. With small businesses, a lender may not be willing to assume the risk that the business will be solvent for, say, 10 years; consequently, banks will require collateral and limit the term of these loans to about five to seven years. Occasionally, exceptions for a longer term may be negotiated. Also, loans secured by real estate can carry an extended term.
The purposes for longer commercial loans vary greatly, from purchases of major equipment and plant facilities to business expansion or acquisition costs. These loans are usually secured by the asset being acquired and financial loan covenants are regularly required.